Tax Overhaul Drama in Raleigh Takes Another Turn


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The tax reform/tax cut debate in the North Carolina capital continues into another dramatic week. Yesterday, Senate President Phil Berger pulled his chamber’s version of reform from the floor calendar, before Senators held their final vote on the plan, amidst speculation that Senate and House leaders were meeting behind closed doors with Governor Pat McCrory to hammer out a compromise before the final vote. 

But today we learned that the plan is going back to the Finance Committee for a complete rewrite. Savvy lawmakers don’t like bringing legislation to a vote that they know won’t pass, and odds are that’s what Senator Berger realized, so all the puzzle pieces are back on the table.

Despite rumors that this sudden change of plans could mean tax reform is in jeopardy, we aren’t holding our breath for a Louisiana or Oklahoma style implosion and collapse in North Carolina.  As all three parties bring their reform priorities to the table, an all-too likely outcome is that we could see the cost of tax reform grow even higher than the annual $1.3 billion loss in the Senate plan.

Why? Each legislative chamber has one or more constituencies lobbying for protection of their special tax code carve outs. The House bill, for example, already preserves the costly mortgage interest deduction because the realtors demanded it.  The Senate version may have to leave Social Security payments alone after hearing from the local AARP chapter, even though taxing them would reduce the bill’s cost (by broadening the base of taxable income thus producing more revenues). Meanwhile, the Governor doesn’t seem to be wielding much clout over the bill’s final form, but having campaigned on revenue neutral tax reform (reform that doesn’t break the bank), his blessing for the final bill will be helpful.

It’s now a wait-and-see moment in the Tarheel State, so it’s a good time to check out more great resources coming from the North Carolina Budget and Tax Center with assistance from ITEP staff which highlight what’s at stake in this ongoing and intriguing debate: Cataloguing the Impact of the Senate Tax Plan and Doubling the Standard Deduction is insufficient to protect low- and moderate income families.

 

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